Asleep at airfare wheel

Sometime in late November, the Ministry of Civil Aviation took note of a sudden, concerted, and, prima facie, collusive, hike in airfares to exorbitant levels across the aviation industry. The minister of civil aviation, faced with public ire, chose to refer the matter to his ministry's captive regulator, the Directorate General of Civil Aviation (DGCA), rather than to the Government's independent regulator on anti-competitive practices, the Competition Commission of India (CCI).

The commission chose not to exercise its legitimate powers in the case of exorbitant rise in airfares

Experts have questioned the ministry's decision to resort to the DGCAand strong-arm tactics reminiscent of the licence-permit raj. According to Ritin Rai, a Delhi-based lawyer specialising in commercial disputes, "DGCA is powerless to act against predatory pricing, this is the exclusive domain of the CCI." Vinod Dhall, former acting chairman of the commission, concurs, "The ministry should not have intervened in this manner through the DGCA in a liberalised economy. The real authority relevant in this case is CCI."

The real question mark over the role of the CCI arises not so much because the Government ignored it, but because the commission itself chose not to exercise its own legitimate, and considerable, powers in this case. "The commission is empowered to take suo moto action if it believes that there is prima facie collusive action by market players," says Dhall.

When asked why the CCI hasn't taken suo moto note of the airfare issue even though three weeks have passed since the controversy erupted, Chairperson Dhanendra Kumar only said, "We are seized of this matter at the Competition Commission, among other matters." The CCI's intervention record thus far, since it was finally instituted as an enforcement body in March 2009, is hardly encouraging. Not a single final order finding a violation has been passed so far. In fact, in a rare final order passed in the first week of December, six members of the commission, in a controversial 4-2 verdict, that once again raised questions about the commission's competence, over-ruled their own investigation wing's findings that had clearly said that the prepayment penalties on home loans charged by home finance lenders were an anticompetitive practice.

Kumar disagrees with the perception of inaction: "Most of the cases we deal with are highly complex. In most countries around the world, such cases take three-four years to resolve. We cannot be hasty as the future of a business can be determined by any decision."

So, is there nothing the commission can do in the short run to stop an anti-competitive practice? Not quite. Under Section 33 of the Competition Act, the commission is entitled to pass an interim order granting immediate relief. "We have used this provision, for example, in cases where cinema associations in particular states have concertedly blocked the release of a film. We have provided relief in 48 hours," says Kumar.

That makes the inaction on the airfare issue even more baffling. Some of the lethargy may be explained by the fact that unlike other competition authorities, particularly in the advanced capitalist economies, CCI is disproportionately made up of bureaucrats rather than professionals.

At the top, Kumar is a retired IAS officer. Three of the other six members, H.C. Gupta, Anurag Goel and M.L. Tayal, are also retired IAS officers. R. Prasad is a former chairman of CBDT, and P.N. Parashar is a former judge. Among the members, only Geeta Gouri is a trained economist but she too comes from within the government system, having worked for the electricity regulator in Andhra Pradesh. Unsurprisingly, this has led to creating a general impression that posts in the commission are being handed out as post-retirement perks to favoured bureaucrats rather than to competent professionals.

It is, of course, a lucrative postretirement job. While the jobs of chairman and member are equivalent in status to secretary to government, the salaries drawn are much higher. The chairman draws a handsome salary of Rs 3 lakh a month while each of the members draws Rs 2.5 lakh per month. There are, however, no additional perks like a government house or car. Dhall says, "The marketoriented salary structure was instituted to attract talented young professionals." It seems to, however, have attracted babus in numbers.

Even at the level of staff, at least 50 per cent are on deputation from the Government of India, with a large number, including the secretary of the commission and DG investigations, from the Indian Revenue Service and the government's accounting services. Kumar defends the quality of his staff. "We send all of them to the US and Europe for training and we have received excellent feedback from there." Rai sounds a supportive note: "Even though a lot of the staff is from within the government, they have enough expertise."

Unfortunately, those views will find few takers until the commission firmly, and visibly, demonstrates its ability to reign in anti-competitive practices. Some action on airfares may be a good starting point.

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